2009 (9) TMI 163 - AT - Service Tax

Management, maintenance or repair service valuation - benefit of the Notification No.12/2003-ST. - abatement of value of the goods and materials sold by appellant-service provider - appellant entered fixed price quotation for doing work of Ministry of Defence - appellant has produced invoices which would clearly indicate that there is a sale of the parts/ materials and there is also an element of labour charges charged separately. In view of this when there is a clear distinction available between the sales of the materials/parts and the labour charges, we are of the opinion that the impugned order which confirms the demand on the amount of the materials/parts sold and used for rendering of repair and maintenance service is incorrect and the impugned order to that extent is liable to be set aside

Summary

Issues:
Service Tax liability on maintenance or repair services for the period from October 2004 to March 2006 under Section 73 of the Act; Correct availing of the benefit of Notification No. 12/2003-ST regarding the reduction of value of goods and materials sold by the service provider from the gross value of taxable services.

Analysis:
The appeal challenged Order-in-Original No. 8/2008, which confirmed a Service Tax liability of Rs. 17,36,16,529 on the assessee for maintenance or repair services. The appellant, M/s. HAL, undertakes repair and overhaul of engines, constituting taxable service under Section 65(64) of the Act. The adjudicating authority found the appellant had not discharged the correct Service Tax liability and ordered payment of the balance amount. However, penalty under Sections 76, 77, and 78 was waived due to the appellant's status as a public sector undertaking under the Ministry of Defence. The issue involved the correct valuation of taxable services for charging Service Tax under Section 67 of the Act.

In response to the appeal, the appellant argued that a similar issue involving the Helicopter Division had been decided in their favor by the Tribunal. The Revenue, represented by the Jt. CDR, contended that the appellant had not paid sales tax on the materials supplied, disputing the appellant's claim of separate material and labour costs. The Tribunal examined the invoices and submissions, finding that the appellant correctly availed the benefit of Notification No. 12/2003-ST by showing material and labour costs separately. The appellant had documentary proof of sales tax payment for all divisions, and the Tribunal noted that the Helicopter Division's case decision favored the appellant.

Upon thorough scrutiny, the Tribunal concluded that the appellant had correctly availed the benefit of the notification by clearly indicating the value of goods and materials separately in their invoices. Citing previous decisions and the appellant's compliance with tax regulations, the Tribunal set aside the impugned order and allowed the appeal with consequential relief. The Tribunal emphasized the distinction between material sales and labour charges, affirming the appellant's correct treatment of the Service Tax liability. The decision was based on the factual matrix and legal provisions governing the valuation of taxable services for Service Tax purposes.

Therefore, the Tribunal's decision favored the appellant, recognizing their compliance with tax regulations and the correct availing of benefits under Notification No. 12/2003-ST. The judgment highlighted the importance of documentary proof, clear invoicing practices, and adherence to legal provisions in determining Service Tax liability for maintenance or repair services.